The business and culture of our digital lives, from the L.A. Times

Groupon IPO: highest tech valuation since Google

November 4, 2011 | 8:19
am

Groupon's initial public offering is on at $20 per share, to give the Chicago daily deals site a valuation of $12.7 billion.

That's the highest tech valuation since Google went public in 2004 at a valuation of $23.1 billion, according to the San Jose Mercury News. So, can Groupon be the next tech industry giant that Google has grown to be?

Groupon seems to think so, issuing about 35 million shares on Friday that will sell for more than "the initially projected range of $16 to $18, as demand materialized despite lingering concerns about Groupon's accounting and business model," noted Times reporter Walter Hamilton in a story he wrote about the company's IPO.

The daily deals site will trade on Nasdaq under the symbol "GRPN." Groupon's chief executive, Andrew Mason, was in New York on Friday to ring Nasdaq's opening bell.

The Chicago Tribune's editorial board wrote that Groupon's IPO will help change Chicago's reputation "for a city with, at best, a mixed reputation as a hub of business innovation."

"Can it really be just three years ago that Northwestern University grad Andrew Mason and his gutsy financial backers launched their daily deal site, spawning a new industry?" the Tribune asked. "Can it really be that Groupon expanded from 37 employees in late 2009 to more than 10,000 today? It's an amazing business story."

It's also a business story that has left many investors questioning whether or not Groupon has a sustainable business model.

"There's fear — perhaps smugness on the part of rivals — that the company is a flash in the pan, too easily imitated and failing to pay off for its advertisers," the Tribune wrote. "Missteps in reporting its financial results have raised legitimate questions. The answers haven't always been satisfactory."

Currently, Groupon operates in 35 countries, with more than 3,000 employees and expected annual revenue of $500 million this year. The company is said to have turned its first profit after just seven months in business and makes its money by taking a 50% cut of each discount coupon it sells through its website.

In early trading on Friday, shares of Groupon rose nearly 50% to about $27.71 per share.